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Read on to see an article posted on the OMG blog on 7 February 2021:

Can't get much worse

Reviews

The FTSE 100 gained 1.3%, while the FTSE 250 advanced 4.2% with the AIM All Share charged 4.4%. As the Covid Vaccine roll-out gathers pace the optimism of ‘freedom’ and reopening of society is a WHEN  not IF.  UK Unemployment rose to 5% and expected to grow to 7.5% as hospitality and retail sectors restructure.

The US passed Biden’s $1.9trillion Covid support which mitigate their disappointing growth in Unemployment. US Inflation, however, is reported on Wednesday and a rise in January to 1.6% from 1.5% may be the beginning of an inflationary spiral.

There is plenty of UK industrial, construction and manufacturing stats with the red flag of GDP on Thursday which for the 3 months to December should show growth of 0.6% but the immediate prospects are not good while for the year to December 2020 GDP maybe 8.1% lower. It should soon be getting better all the time……

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NetCall (AIM:Net)

59.5p (58p-61p)

Mkt Cap: £88m

Next Results:  Interims Wednesday 24th Feb

NET’s trading update ahead of these interims indicated strong growing demand for its cloud services. It’s a leading provider of intelligent automation and customer engagement software and expects 13% revenue growth to £13.4m for the six months to December. The migration to a cloud-based services for its Intelligent Automation and Customer Engagement offerings is accelerating. This is sticky revenue as the annual contract value (Reoccurring Revenue) is set to increased 25% to £8.4m with an EBITDA expected to grow by 38% to £2.9m. Gross margins are just under 90% so increased revenue flows straight through to

Organic growth was supplemented by last year’s acquisition of Automagica. This adds to its automation capabilities and has been integrated onto its Liberty platform and the new services is set to be   released shortly. This a complete omnichannel and cloud-based contact centre solution built for the customer journey and agents can work from anywhere. While is supervisors can customise dashboards showing real-time analysis for queuing and agent reporting as well as schedule and share reports, plus export data into reporting tools.

This strengthens the product offering and Net’s ability to help organisations with their growing digital transformation needs. Its main markets are   Financial Services, Healthcare and Public Sector and clients include two-thirds of the NHS Acute Health Trusts and leading corporates such as Legal and General, Lloyds Banking Group, ITV and Nationwide Building Society. These interims are likely to see the reinstatement of forward guidance; last year a PBT of £0.5m was made on £25m turnover and a token dividend was paid. On the existing run rate for the 12 Months to June we estimate a  33% increase in  PBT to  £0.75m for a prospective P/E of around  30 x. Over 40% of the shares, however, are not in public hands.

 

Financials

The net funds should be around £10.7m which is after an Initial £1m payment for the Automagical acquisition. Further acquisitions may need funding.

 

Trading Strategy

Organic growth is largely in the price but the earnings boost from reaching critical mass and further corporate activity make it  a speculative buy.

 

Last OMG! price 37p


 

Reviews

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Filtronic (AIM: FTC). The Interims to November showed stability after last year’s  corporate upheaval.  Like for like revenue is 5% lower at £7.1m with an operating profit of £0.1m compared to a £0.5m loss. The cash generation improved greatly, and net cash was £1.6m even after some debt repayments.

SO, investors can almost look through the lifting Covid Clouds to the potentially exciting future for this supplier of critical telecoms infrastructure. Presently, however its international business is being Covid constrained.  Growth in sales of FTC’s mobile telecoms solutions is [eventually] set to benefit from increased demand for secure and high-performance mobile broadband. The UK [and others] are replacing China’s Huawei solutions and the UK is developing the Oneweb initiative [connectivity to everyone everywhere]. There is demand for mobile network penetration on the rail system and the 5G rollout is gathering pace. There is also likely to be follow-on orders   from the recently won £1m UK defence contract.  The EBITDA margins of 8.5% should start to improve so the recent 8p seems a medium term buy.

Last OMG! 8.4p

 


Alumasc (LSE: ALU) are 154p having improved from 131p after reporting interims to December and a Director buying 7,000 shares at 148p. The recovery in this supplier of building products was even better than the upward revised expectations with a more than a 100% increase in Profits to £5.5m after an 11% increase in Revenue to £45.6m. A particularly strong performance was reported for the Water Management Division which represents around 42% of Group Revenue which made a £3.5m profit. The interim Dividend was increased from 2.75p to 3.35p, as there is almost no debt as well as strong cash flow and demonstrates confidence. The prospective P/E is around 10x and with a 3.5% yield so still worth buying for the medium term.

Last OMG!  131p

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